A Little Insight into the Financial Reform Bill

http://www.forbes.com/2010/05/24/financial-reform-economy-tarp-opinions-columnists-william-m-isaac.html?boxes=opinionschannellatest

The Case for Regulation

In reference to yesterday's post, here is another viewpoint from Robert Reich, Secretary of Labor in the Clinton administration. He may a too far to the left of me on some issues, but here he supports my stance that the investment vehicles and trading practices of financial institutions need new regulations to prevent future economic chaos.

http://www.ft.com/cms/s/0/0666adfe-ffb6-11de-921f-00144feabdc0.html?nclick_check=1

The Time to Regulate is Now

I am a defender of free markets, low taxes, and minimal regulation. However, there is a reasonable and moderate extent to which these principles are effective. The current global economic situation is a direct result of actions within the financial world. Obviously "Exhibit A" is the use of loosely-regulated mortgage backed securities, the most risky form of collateralized debt obligations. Since the beginning of the Great Recession and the bailout of assorted financial institutions including AIG, Citi, and BoA, no significant regulatory reforms have been enacted to prevent the continuation of similar practices. I'm no financial guru, nor can I comprehend Gaussian copula models (models for pricing CDOs), but I can tell you that the financial system needs a new set of limits. Financial and banking institutions have been aching to pay back TARP funds and return to profitability, and I'm not so sure I can trust them to avoid new unorthodox and seriously risky investment vehicles. While the White House and Congress have been hammering away at passing health care reform and carbon cap-and-trade legislation with exorbitant projected costs, they have put financial reform on the back-burner. 2009 was a year of misplaced priorities. The time to regulate is now.

Further reading:

http://online.wsj.com/article/SB10001424052748703652104574652242436408008.html